South East Water could lose its operating licence after residents across Kent and Sussex faced up to a week without water.
The environment secretary, Emma Reynolds, has called for the regulator to review the company’s operating licence. If it were to lose it, the company would fall into a special administration regime until a new buyer was found.
If the regulator, Ofwat, decides the company has breached its licence but decides not to revoke it, penalties include a fine of 10% of the company’s annual turnover. Ofwat in 2024 decided Thames Water was in breach of its licence but decided to avoid forcing it into special measures and instead insisted on a turnaround plan.
This week 30,000 properties faced having low or no water, and 17,000 are thought to still be affected, with many of them in Tunbridge Wells. This is the second time in as many months that the Kent town has been without water, after the taps ran dry for 24,000 households for two weeks in the run-up to Christmas.
The company has blamed bad weather for leaks in its ageing pipe system that caused water outages across its network. Water companies have a statutory duty to maintain a sufficient supply of wholesome water to their customers.
Reynolds said: “Today I met with local residents in Tunbridge Wells who are facing huge levels of disruption to their water supplies. It’s completely unacceptable, I recognise their frustrations and want to thank people for pulling together. I’m calling on the chair of South East Water to explain why this continues to happen and Ofwat to review if the company is meeting the requirements of its operating licence.
“These failures cannot continue to happen. This government is reforming our water system and securing investment into our infrastructure, to avoid incidents like this in future.”
David Hinton, the chief executive of South East Water, has faced cross-party political pressure including from the Liberal Democrat MP for Tunbridge Wells, Mike Martin, to resign after failing to appear in public during both crises. At a recent environment, food and rural affairs parliamentary committee hearing, Hinton gave himself an eight out of 10 for dealing with water shortages.
He has a base salary of £400,000 and received a bonus of £115,000 last year. He told the committee that he did not do interviews during the last outage because the questions would focus on his pay and bonus, which he believed would have been a distraction.
NatWest Group Pension Fund, a major shareholder in the company, issued a rare warning. The fund, which owns 25% of South East Water, said it was “extremely concerned” by the impact the outage was having on households, adding it would use its influence to put pressure on the board to resolve the issues.
The water shortages in Kent and Sussex follow a torrid few years for the entire water industry in England. The sewage scandal, where companies have been dumping illegal quantities of raw sewage into rivers and off the British coast, has led to calls for the industry to be renationalised. Growing financial challenges and a lack of accountability mean the sector is sometimes depicted as a textbook example of the drawbacks of privatisation.
No water companies have yet been taken out of private ownership as a result of dumping sewage.
An Ofwat spokesperson said: “We are concerned that residents in Kent and Sussex are without water again and are working with the Drinking Water Inspectorate, which is the lead regulator for this latest supply interruption, to ensure that regulation and enforcement is aligned.
“Ofwat already has an active investigation into South East Water related to its supply resilience, and we have met with the company to discuss these latest incidents as part of that investigation.
“We will review all of the evidence before taking a decision on what further action may be required into whether the company has met its legal obligations set out in its licence relating to customer care, including with further potential enforcement action.”
The water company previously said it was doing “everything” it could to support affected customers and said its repair teams were working “around the clock” to restore supplies.
South East Water said the water would be back on on Thursday.
The company has said of Hinton: “David Hinton, chief executive, remains committed to resolving the immediate issues facing customers in both Kent and Sussex, whilst continuing to seek to obtain the investment to deliver the much needed improvements in resilience to the South East Water network, detailed in the company’s business plan.”
